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Artificial intelligence (AI) is still an emerging technology, meaning you can invest in this growing phenomenon at an early stage.
This guide analyzes the 10 best AI stocks for maximum long-term potential. We cover a broad range of AI investments to help you mitigate the risks, including small caps, pure-plays, and blue-chip behemoths.
Let’s start with a quick overview of the 10 best AI stocks available today: We’ll now explore the investment thesis of the above AI stocks list. Read on to discover the best AI investments for 2023. The first AI stock to consider is NVIDIA. This large-cap company – which is now valued at over $1 trillion, isn’t an AI pure-play. On the contrary, NVIDIA is the market leader in Graphics Processing Units (GPUs). However, GPUs are one of the most important components for AI to thrive. For example, NVIDIA GPUs are used for AI computation and autonomous vehicle technology. As these concepts grow, so will demand for NVIDIA products. In fact, NVIDIA also powers ChatGPT – which receives over 1.5 billion visits every month. NVIDIA’s dominance in this industry is not only substantial, but it has an extremely robust balance sheet. This will enable NVIDIA to continue developing and manufacturing the world’s most advanced GPUs. For example, NVIDIA reported cash and short-term investments of over $16 billion in its most recent quarterly earnings report. It also has total assets of $49.56 billion, while liabilities are less than half at $22.05 billion. NVIDIA is also one of the top AI stock gainers year-to-date – with growth of over 200%. Over a five-year period, NVIDIA stock is up more than 780%. NVIDIA is also a consistent dividend payer. However, its running dividend yield is currently just 0.04%. This low yield is due to NVIDIA’s stock price increasing at a much faster rate than it can raise dividends. We also like that NVIDIA is in good hands – its CEO – Jensen Huang, has been at the helm since the firm was founded in 1993.
One of the best AI stocks for pure-play investors is BigBear.ai. Founded in 2020, BigBear.ai has developed AI-backed technology that helps organizations make quick, smart decisions. It enables firms to analyze large data sets in real-time and extract useful insights to improve efficiency. Not only will BigBear.ai service private organizations, but it’s currently working with the US military. For example, its technology is being leveraged by the Air Force Research Laboratory to reduce operational planning processes. What normally takes two years can now be achieved in under a month. This gives BigBear.ai solid credibility as a potential market leader in the coming years. In the meantime, BigBear.ai stock is trading with a market capitalization of just $207 million. This will appeal to growth investors who want exposure from the ground up. Although BigBear.ai trades on the NYSE, it’s also considered one of the best penny stocks. Shares are currently trading at just $1.33. Year-to-date, BigBear.ai stock has increased by over 82%. However, the stock is down 86% when compared to its 2021 IPO price. Nonetheless, high volatility is expected with a low-cap growth stock – so now could be a good time to enter a position. Recent quarterly earnings were positive – revenues were up 2.25% and operating expenses were reduced by 24.71%. That said, BigBear.ai is still a loss-making company, losing $16.9 million during the quarter.
C3.ai is also one of the best AI stocks to buy today for pure-play investors. Founded in 2009, C3.ai provides AI solutions to the private sector. It has three core divisions, ensuring that the firm is well diversified. First, C3.ai offers software suites to large companies who want to develop AI within their organizations. It helps companies handle huge data sets to improve existing business processes. Second, C3.ai also offers pre-built AI applications. These help companies generate new insights, such as optimized supply chain networks and more efficient manufacturing models. Third, C3.ai also provides solutions to firms who want to incorporate AI but don’t have the required technical understanding. It provides bespoke applications based on the client’s needs and objectives. In terms of valuation, C3.ai currently has a market capitalization of just over $3 billion. It’s one of the best-performing AI stocks this year, with gains of almost 140%. However, C3.ai is trading at a 77% discount when compared to its December 2020 IPO. This could highlight an appropriate time to enter a position, considering the favorable entry price. Like many AI pure-plays, C3.ai is currently losing money. Its most recent quarterly report showed a $64.36 million loss. That said, its balance sheet looks solid. It has $750.88 million in cash and short-term investments. And only $156.96 million in total liabilities – which includes short-term debt.
IBM offers some much-needed stability when investing in AI stocks. This large-cap tech stock – valued at over $125 billion, has been innovating since its inception. In fact, IBM was behind Deep Blue – the AI supercomputer from 1985 that defeated world chess champion, Garry Kasparov. Fast forward to 2023 and IBM is now developing Watson. Watson is an AI suite that can process and analyze an unprecedented amount of data. Working alongside natural language processing and machine learning, Watson helps organizations make informed, data-driven decisions. It can also be used to automate routine tasks, making them faster, cheaper, and more efficient. It’s also believed that IBM Watson will be able to suggest treatment plans and even diagnose diseases. All that being said, Watson – and AI in general, forms a small segment of the overall IBM business model. Other divisions include cloud and quantum computing, IT services, cybersecurity, hardware manufacturing, and networking services. Therefore, IBM stock offers a diversified way to invest in the future AI. IBM stock is relatively staple, with the firm increasing by just 3.6% over the prior 12 months. On a five-year basis, IBM stock has grown by just over 15%. We like IBM’s consistent dividend policy, including its current running yield of 4.8%. In this regard, IBM is the best AI stock to buy for dividend income.
UiPath is an AI pure-play with limitless potential – considering its proprietary product could revolutionize all industries and sectors. In a nutshell, UiPath analyzes day-to-day processes to find tasks that could be automated through AI. For example, consider a financial institution that manually reviews bank statements to comply with anti-money laundering regulations. Through UiPath, the firm could automate the process entirely, freeing up much-needed time and operational expenses. UiPath will ultimately make organizations more efficient, allowing them to concentrate on growth rather than mundane, unprofitable processes. In addition to AI, UiPath also specializes in robotic process automation (RPA). RPA is another emerging technology that is expected to witness rapid growth in the coming years. Although UiPath was founded in 2005, it wasn’t until 2021 that the stock went public. Today, UiPath stock is valued at over $9 billion. Year-to-date, this AI stock has increased by over 30%. However, UiPath is trading 78% below its 2021 IPO valuation. Once again, this offers an attractive entry price for new investors. UiPath’s most recent earnings report was solid. Although the firm made a $60.36 million loss, this was a 49.86% improvement year-over-year. Moreover, revenues were up 18.61% and net profits widened by 57.73%.
Microsoft is one of the largest companies globally – with a market capitalization of over $2.4 trillion. Although Microsoft is best known for its Windows operating system, it’s now diversified into a wide range of emerging markets. At the forefront of this is artificial intelligence, with Microsoft acquiring OpenAI for $13 billion in 2019. OpenAI is the company behind ChatGPT. Although ChatGPT is currently a standalone product, the underlying technology is being incorporated into all Microsoft divisions. This includes the core Microsoft Office suite, such as Word, PowerPoint, and Excel. ChatGPT’s framework is also helping Microsoft’s cloud computing division – Azure. It enables developers to fast-track the building and deployment of AI models. It’s also worth remembering that Microsoft has one of the strongest balance sheets on Wall Street. This will enable it to continue its investment in AI research and development. For example, as per Microsoft’s most recent earnings report, the tech giant is holding $111.26 billion in cash and short-term investments. This is up 6.21% year-over-year. Furthermore, Microsoft saw an 8.34% rise in revenues, up to $56.19 billion. Net income also surged during the quarter, increasing by 10.72% to $35.74 billion. Not only that but Microsoft is a Dividend Aristocrat. It’s increased its annual dividend payment for 21 consecutive years. However, the running dividend yield is just 0.91%.
SoundHound AI is also one of the best AI stocks if you’re looking for a small-cap pure-play. Put simply, SoundHound AI has developed AI voice recognition technology that helps machines understand human speech. While somewhat similar to Alexa and Siri, SoundHound AI has customized its technology for its own products and services. For example, SoundHound AI has developed an app that tells users the name and artist of any song it hears. This is with unprecedented precision and accuracy, as per feedback in the public domain. SoundHound has a 4.9/5 rating on the App Store across 180,000+ reviews. On Google Play, 928,000+ users rate SoundHound 4.5/5. SoundHound AI is also developing services for the private sector. This includes conversational intelligence, allowing businesses to streamline complex tasks through voice recognition. All that being said, SoundHound AI is only just getting started – which is reflected in its small market capitalization of just $406 million. SoundHound AI stock has witnessed a lot of volatility since its 2022 IPO. Right now, the stock is trading for just $1.69 – meaning it’s up 29% year-to-date. However, this price point is 74% below its IPO valuation. The key issue facing investors is profitability. In its most recent quarter, revenues were up by 42.25% to $8.75 million. However, this still resulted in a $21.93 million quarterly loss. That said, the firm has $115.75 million in cash and short-term investments, which almost clears its total liabilities in full.
Palantir Technologies is a large-cap stock that specializes in cybersecurity solutions for both the private and public sectors. It leverages artificial intelligence and big data analytics to detect and prevent threats. In the private sector, this could be anything from predicting manufacturing downtime or identifying money laundering and terrorist financing risks. In the public sector, Palantir Technologies has formed significant partnerships with the US military. For example, it helps the US Army make real-time decisions through predictive machine learning and AI. It also helps develop defense software and automate operational processes. Considering increased tensions in the Middle East, Palantir Technologies is well-positioned for continued growth. In fact, Palantir Technologies stock is up 17% in the prior month alone. And year-to-date, the stock has increased by 160%. Although Palantir Technologies has a market capitalization of over $35 billion, it only went public in 2020. Therefore, this is very much a growth stock with plenty of upside potential. Looking at the financials, Palantir Technologies has a robust balance sheet. While total liabilities stand at $945 million, it holds over $3 billion in cash and short-term investments. As such, it covers its short and long-term debts three times over. Its most recent quarterly report showed a 12.75% revenue increase year-over-year, up to $533.32 million. There was also a 115.68% increase in net income. However, this stood at just $28.13 million – so Palantir Technologies needs to work on reducing its operating expenses.
Founded in 2007, Symbotic is an AI pure-play that went public in 2021. It specializes in AI-driven robotic automation, allowing commercial businesses to streamline production tasks. More specifically, it helps warehouses and supply chains operate more efficiently through autonomous organization. Symbotic is clearly onto something – as it’s already attracted investments from Softbank and Walmart. In fact, Symbotic is already automating 42 distribution centers for Walmart – with more lined up in the coming months. Symbotic is also one of the fastest-growing stocks this year – with growth of 241%. Since its March 2021 IPO, Symbotic stock has increased by 293%. That said, its current market capitalization of almost $23 billion could be just a small fraction of its true value – especially considering its recent quarterly report. Revenues were up 77.63% year-over-year, and net income rose by 78.79%. What’s more, net profit margins increased by 88.09%. Although Symbotic still made a small quarterly loss, this stood at just $4.35 million.
Alphabet – Google’s parent company, has huge ambitions in the AI space. According to Reuters, Alphabet has invested over $200 billion into AI over the prior decade. More recently, this includes a $300 million investment in AI research firm Anthropic, which was founded by former employees of OpenAI. Alphabet is leveraging AI in many of its core products, including its Google search engine and YouTube. The latter offers personalized experiences for users and accurately helps suggest suitable videos. Google Cloud is also utilizing AI to help developers train machine learning models. This can be executed without prior AI experience. Although Alphabet has also launched its own version of ChatGPT – Bard, the overall feedback from users was overwhelmingly negative. Nonetheless, Alphabet has the expertise and financial resources to improve Bard’s capabilities. In terms of performance, Alphabet stock has increased by over 55% year-to-date. over a five-year period, the stock is up 156%. Like many mega-cap tech stocks, Alphabet doesn’t pay a dividend. It reinvests its proceeds back into research and development, including AI and machine learning. Alphabet has a bullet-proof balance sheet, with over $118.33 billion in cash and short-term investments. Moreover, its most recent quarterly earnings saw a 7.06% increase in revenues, up to $74.6 billion. Net profit margins also increased by 7.23% and operating experiences rose by just 3.58%.
AI stocks are publicly listed companies that are directly or indirectly involved in artificial intelligence. Some AI stocks are classed as ‘pure-plays’. This means that their business models are exclusively focused on the growth of AI. For example, UiPath is a pure-play, as its primary product utilizes AI to automate manual tasks for the private sector. SoundHound AI is also a pure-play, considering its voice recognition technology is facilitated by AI. Some AI stocks are loosely involved in AI, meaning the technology doesn’t represent their primary revenue source. NVIDIA is a good example here, as the firm specializes in GPUs. However, as GPUs are required to fuel AI computation models and autonomous vehicles, NVIDIA still offers exposure to AI. Microsoft is another example, as the tech giant makes most of its revenue from operating systems and digital software. However, considering that Microsoft owns OpenAI – the firm behind ChatGPT, it’s very much an AI stock. Ultimately, AI stocks allow you to invest in the future of artificial intelligence. This is expected to be one of the fastest-growing markets in the coming years, so now could be a good time to build a portfolio of AI stocks. We’ll now explore why AI stocks could be a good investment for long-term investors. The artificial intelligence concept dates back to the 1950s, so it’s hardly a new technology. Fast forward to 1985, and AI was leveraged by IBM in its Deep Blue project. IBM’s AI computer was able to beat world chess champion Garry Kasparov with ease. That being said, AI has grown to new heights in recent years and is now making serious headways in every industry imaginable. We’ve only just scratched the surface of what AI can do, so the market is expected to grow exponentially in the coming years. For example, Statista Market Insights, estimates the global AI industry will be worth over $738 billion by 2030. Based on current estimates, this represents a compound annual growth rate of 17.3%. According to a Bloomberg publication, AI will become a $1.3 trillion market by 2032. The key takeaway here is that right now, artificial intelligence is worth just a small fraction of its future potential. There’s no denying that AI will play a major role in all walks of life, so gaining exposure to the industry now could be a smart move. To offer some context, investing in AI today is not dissimilar to buying internet stocks in the 1990s – such as Microsoft and Amazon. Or, investing in electric vehicle companies like Tesla in the early 2010s. If you’re looking to invest directly in AI-centric companies, you’ve got plenty of options. This makes it seamless to build a diversified portfolio of AI stocks. Moreover, many AI pure-plays are relatively young and have small market capitalization. This offers huge upside potential in the long run. For example, BigBear.ai – which helps the public and private sectors make smart decisions through AI data analytics, is currently valued at just $207 million. This is small-fry when you consider that established blue chips like Microsoft and NVIDIA are trillion-dollar companies. BigBear.ai was founded as recently as 2020, so you’ll be investing in a brand-new growth stock. Similarly, SoundHound AI is another pure-play that has a small market capitalization – it’s currently valued at just $406 million. This AI stock went public as recently as April 2022, so you invest from the ground up. While some investors will look for AI pure-plays, it’s also worth considering established companies that have exposure to this industry. This helps mitigate the risk, as you’ll be investing in AI stocks that already dominate their respective sectors. What’s more, companies like Microsoft, NVIDIA, and Alphabet have robust balance sheets with vast financial resources. Not only does this mean they have the capacity to invest capital into research and development, but they can acquire AI startups with unique products and services. For example, consider Microsoft – which holds $111.26 billion in cash and short-term investments, as per its most recent quarterly statements. Crucially, Microsoft and Alphabet are ideal for risk mitigation strategies, as they generate the majority of their revenue from other sources. As such, you won’t be overexposed to AI when investing in these companies. Choosing the right AI stocks for your financial goals and risk tolerance is crucial. What’s more, AI should only form a small part of your overall portfolio. This ensures you avoid becoming overexposed to AI, as nobody quite knows what the future holds. In this section, we discuss best practices when choosing the best AI stocks to buy now. The first step is to ensure you’re well diversified. Not only in terms of the number of stocks but the type of AI companies. Risk-averse investors might consider a balanced approach to AI. For example: You’d also want to consider the market capitalization too. BigBear.ai and SoundHound AI are small-cap stocks worth considering. Then there’s UiPath and C3.ai, which are valued at several billion dollars. You might also explore new AI stocks that are about to go public. This enables you to invest before the company trades on stock exchanges, meaning you’ll get the most favorable cost price. Ultimately, the more diversified your AI portfolio is the better. There is every chance that some of your AI investments won’t meet your expectations, while others will exceed them. This ensures you’re trading AI stocks without putting all of your eggs in one basket. AI is a huge growth market that also carries additional risk. This is especially the case when investing in AI pure-plays with small valuations and weak balance sheets. This means that as an investor, you should expect to make higher gains than the market average. After all, you’re taking on more risk when investing in an emerging industry like AI. Crucially, when selecting the top AI stocks to watch, look for companies with strong momentum. For example, C3.ai stock has generated growth of over 140% year-to-date. Similarly, UiPath is up 78% and Symbotic has increased by 241%. In contrast – the NASDAQ 100 Composite has increased by just 32% over the same period. This is a reasonable benchmark to use, considering that the NASDAQ largely consists of tech-based companies. There is often a direct correlation between stock price momentum and quarterly earnings. After all, if an AI company is performing well, this is often reflected by increased stock prices. However, this isn’t always the case, so it’s important to research the stock’s most recent quarterly performance and how this compares to previous periods. First, you’d want to explore revenue. Ideally, the AI company should increase its revenue each quarter. This highlights that the firm is consistently generating more income. Next, you should also assess operating expenses. This determines how much the AI company is spending to generate revenue. For example, Symbotic’s most recent quarterly earnings saw a 77.63% increase in revenue year-over-year. The company brought in $311.84 million during the quarter. Although operating expenses also rose, this was only by 46.99%, up to $94.92 million. This is a good sign, as Symbotic was able to increase revenues while reducing expenses. Investors should also consider financial health when picking the best AI stocks to buy right now. This is very important when exploring small-cap AI companies that are firmly in growth mode. After all, small-caps often have limited cash flow and have a strong reliance on debt. Now let’s compare this to UiPath. This AI stock has $686.77 million in total liabilities, but more than $1.83 billion in cash and short-term investments. This means that UiPath can cover all of its debts two and a half times over. As such, UiPath has a robust balance with little cause for concern. We found that the best AI stocks have already secured notable partnerships and backers from established organizations. This ensures credibility, as their business models and long-term vision are recognized by market leaders. For example, although BigBear.ai was only founded in 2020, it’s already secured a contract with the US military. Similarly, Symbotic – a public stock for just over 18 months, has received financial backing from Softbank. Not only that, but Symbotic robots have already been deployed in over 40 Walmart distribution centers. Therefore, when building a portfolio of AI pure-plays, focus on companies that are working with established entities. We’ve established that finding the best AI stocks to invest in is a laborious task. The process requires significant research and analysis, considering the number of companies that operate in this market. To streamline the process, consider using AltIndex – which is one of the best alternative data providers. Read on to find out how AltIndex can help you become a successful AI investor in 2023. AltIndex is an alternative data provider, meaning it takes an ‘outside the box’ approach to investing. So what is alternative data? Put simply, AltIndex uses natural language processing to extract data from social media and other popular websites. Machine learning is leveraged to analyze the data and generate real-time insights on thousands of stocks. For example, if the stock has positive or negative sentiment on Twitter and Reddit, whether its website visits are rising or falling, and if it’s hiring new staff or reducing headcount. These metrics are then packaged together to yield an AI ranking score from 1 to 100. The idea is simple – stocks with a high AI score are ‘Strong Buys’, as they have solid sentiment from consumers. Crucially, this information is accessible long before the general public, as most investors rely on financial news and quarterly earnings. Therefore, AltIndex offers a time advantage and a competitive edge in the market. AltIndex backs up its claims with actual results. For instance, AltIndex offers one of the best AI stock picker services, which is based on its scoring system. Since inception, the service has generated average 6-month gains of 24%. This translates to a win rate of 75%. The process is very straightforward – once you’ve paid for a subscription, AltIndex distributes stock picks via email. All you need to do is buy the recommended stock from your preferred broker. And when it’s time to exit the position, AltIndex will send another email. AltIndex offers many other features that could be useful for your AI portfolio. For example, you can add AI stocks to your AltIndex watchlist and receive alerts when a new finding has been discovered. This might be because the stock is witnessing a surge in website visits or a decline in social media sentiment. In addition, AltIndex also offers price predictions on individual AI stocks. This provides estimated stock price forecasts for the next 6 months, generated by AI. AltIndex charges $29 per month for its starter plan, which comes with 10 AI stock picks every month. To get the most out of AltIndex, you’ll need the pro plan. While this costs $99 per month, you’ll get 25 AI stocks. Finally, we should also mention that AltIndex covers other markets, such as the best energy stocks for 2023. In summary, artificial intelligence is a high-growth market that’s worth just a small fraction of its future potential. But diversification is key, so consider building a portfolio of AI pure-plays alongside established blue chips – such as NVIDIA and Microsoft. Another option is to consider an AI-backed research facility like AltIndex, which offers recommendations on hot AI stocks to buy. AltIndex has a solid track record – including a 75% win rate since its inception. Check out AltIndex today to take the guesswork out of AI investing. Best AI Stocks to Invest in 2023
A Closer Look at the Top AI Stocks to Buy
1. NVIDIA – Market Leader in GPUs; An Essential Component for AI Technology
2. BigBear.ai – AI Pure-Play Stock Valued at Just $207 Million and Partnered With the US Military
3. C3.ai – AI Solutions for the Private Sector With YTD Gains of 140%
4. IBM – Large-Cap Tech Stock With a Growing AI Presence and 4.8% Running Dividend Yield
5. UiPath – Replaces Manual Processes With AI Automation and Now Trades at a 78% Discount From its IPO Valuation
6. Microsoft – Dominant AI Leader After its $16 Billion Purchase of OpenAI [ChatGPT]
7. SoundHound AI – Small-Cap Growth Stock Developing AI Voice Recognition Technology
8. Palantir Technologies – Machine Learning and AI Solutions for the Private and Public Sectors (160% Growth YTD)
9. Symbotic – AI-Backed Robotic Automation for the Warehouse and Supply Chain Industries
10. Alphabet – Huge Ambitions to Become an AI Powerhouse With Over $200 Billion Invested in the Prior Decade
What are AI Stocks?
Why Invest in AI Stocks?
Huge Growth Market
What is the Compound Annual Growth Rate?
Plenty of AI Pure-Plays for Direct Exposure
Established Blue-Chip Companies With Vast Resources are Active in AI
Is There an Artificial Intelligence ETF?
How to Pick the Best AI Stocks to Invest in
Cover a Blend of Pure-Plays and Blue Chips
Stock Price Performance
Quarterly Earnings
Financial Health
Partnerships and Notable Backers
Where to Get AI Stock Tips
AltIndex Review – AI Stock Picks and Insights
Conclusion
References
FAQs
What is the best AI stock to invest in right now?
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